PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 10, Problem 24PS
Summary Introduction
To discuss: The average cash flow that person X would obtain in the mine when it is often kept in the operation and the silver often is sold in the year in which it is mined.
Summary Introduction
To discuss: The average cash flow, when person X closes the mine during the low costs of silver.
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A silver mine can yield 11,000 ounces of silver at a variable cost of $32 per ounce. The fixed costs of operating the mine are $44,000 per year. In half the years, silver can be sold for $48 per ounce; in the other years, silver can be sold for only $24 per ounce. Ignore taxes.
a. What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined?
b. Now suppose you can costlessly shut down the mine in years of low silver prices. What happens to the average cash flow from the mine?
A silver mine can yield 16,000 ounces of silver at a variable cost of $36 per ounce. The fixed costs of operating the mine are $48,000 per year. In half the years, silver can be sold for $52 per ounce; in the other years, silver can be sold for only $26 per ounce. Ignore taxes.
a. What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined? (Leave no cells blank. Enter "0" wherever required. Do not round intermediate calculations.)
b. Now suppose you can costlessly shut down the mine in years of low silver prices. What happens to the average cash flow from the mine? (Do not round intermediate calculations.)
Question:
: Lillian is considering using some of the cash generated from her mail-order business to open a retail store. The fixed investment in the store is expected to be $3.5 million. This investment can be depreciated straight line over five years. Variable costs are estimated to be 35% of sales. The tax rate is 0%. Cash fixed costs total $600,000 per year.
a) What is the net income breakeven point (in sales $) during the first five years? What is it after the fifth year?
Chapter 10 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 10 - Terminology Match each of the following terms to...Ch. 10 - Project analysis True or false? a. Sensitivity...Ch. 10 - Sensitivity analysis Otobais staff (see Section...Ch. 10 - Prob. 4PSCh. 10 - Prob. 7PSCh. 10 - Scenario analysis What is the NPV of the electric...Ch. 10 - Prob. 9PSCh. 10 - Break-even analysis Break-even calculations are...Ch. 10 - Prob. 11PSCh. 10 - Prob. 12PS
Ch. 10 - Prob. 13PSCh. 10 - Break-even analysis A financial analyst has...Ch. 10 - Fixed and variable costs In a slow year, Deutsche...Ch. 10 - Operating leverage You estimate that your cattle...Ch. 10 - Prob. 17PSCh. 10 - Prob. 20PSCh. 10 - Real options Explain why options to expand or...Ch. 10 - Prob. 22PSCh. 10 - Real options True or false? a. Decision trees can...Ch. 10 - Prob. 24PSCh. 10 - Real options An auto plant that costs 100 million...Ch. 10 - Decision trees Look back at the Vegetron electric...Ch. 10 - Prob. 27PSCh. 10 - Prob. 28PSCh. 10 - Prob. 29PSCh. 10 - Prob. 32PS
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